Does Total Decentralization Exist? – Black Mountain Investment Group

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- Scalability – How many transactions per second (TPS)?
- Security – How resistant to attacks is the network?
- Decentralization – How many nodes are there? Are they concentrated in a center of power?
Decentralization, security, and scalability are three essential features a highly functional blockchain platform needs to possess at an optimum level. However, integrating these three features while developing a blockchain network has been a core problem for developers. Oftentimes blockchain developers are forced to sacrifice one of the three important features to accommodate the remaining two.
The Blockchain Trilemma is the inability of blockchains to achieve an optimum level of scalability, decentralization, and security simultaneously. Ethereum’s co-founder Vitalik Buterin made the concept popular, and developers are now focused on finding lasting solutions to this problem. Let’s look at each of the blockchain features causing the trilemma below and some of the solutions new blockchain projects are implementing to mitigate it.
Decentralization
The main idea behind cryptocurrency and blockchain technology is that it should be uncensored and uncontrollable by a third party. This implies that no single person or group should have control over a network. As explained in depth earlier in the article, the standard decentralized protocol for blockchain networks is to be open-source with the network’s control equally distributed to all participants.
Security
Security is a basic feature every blockchain must possess, and it shouldn’t be compromised. it’s the main requirement to have a successful and functional blockchain network. The blockchain security should be impermeable and resistant to malicious attacks. A lack of security mechanisms of every blockchain usually varies with developers, and to ensure safety the must usually audit their blockchain and smart contracts to identify potential loopholes for attacks.
Scalability
Scalability is the ability of the blockchain network to handle more transactions per second. It is a necessary feature that affects the global adoption of blockchain technology because only a highly scalable blockchain can serve billions of users. The inability of most blockchain platforms to attain optimum scalability is why global adoption of blockchain technology isn’t moving at the predicted rate.
Increased adoption of blockchain technology at this point will only lead to more participants, more time to distribute and process information, and less transactions processed per second. Reducing participants and data addition would increase speed and scalability, but it will reduce the network’s decentralization and weaken security. This is why the blockchain trilemma exists, and in this next section we look into some of the most effective solutions that new blockchain projects are leveraging.
Possible Solutions to Solving the Blockchain Trilemma
Although there are still no actual solutions to the Blockchain Trilemma, the approaches of many blockchain developers toward mitigating the problem have yielded encouraging results. We review some of these approaches below:
This is a layer-1 blockchain scaling solution. It involves partitioning blockchains or other databases into smaller units, each unit managing a specific data segment. This reduces the workload of managing the network’s transactions and interactions on a single chain. The smaller units of the divided blockchain are known as the Shards.
Each Shard has its ledger where transactions are recorded. They’re able to process transactions on their own, while the main chain, Beacon chain, manages interactions between them. Sharding involves changing to the blockchain’s mainnet, and it solves the issue of transaction speed without interfering with decentralization and security.
- Layer 2 Scaling Solutions
Unlike layer 1 solutions, this method doesn’t alter the fundamental structure of the underlying network. Rather, it builds on the existing network structure, i.e., adding an additional layer. Side chains and state channels are two common layer 2 scaling solutions approach blockchain developers utilize.
Side chains involve connecting a separate chain to the main chain and optimizing the connection to enable smooth interaction between the two. In turn, this will improve scalability and transaction speed. The state channels, on the other hand, involve leveraging smart contracts to establish interaction with the main chain. It doesn’t need a separate chain, and the blockchain only record the start and end of the channel.
Most blockchain platforms are transitioning from the energy-demanding and slow PoW (Proof-of-Work) consensus mechanism to a more energy-efficient PoS (Proof-of-Stake). Developers believe the PoW consensus contributes to the blockchain trilemma. New blockchains use a form of PoS consensus either fully or in tandem with another consensus.
PoS and other consensus mechanisms apart from PoW have yielded great results in ensuring platform security without sacrificing scalability or decentralization, and developers are exploring that as a solution.
The Blockchain Trilemma has been a core problem impeding blockchain technology from reaching its optimum potential. However, the increased awareness about the issue and concentrated efforts of developers towards solving it has grown exponentially over the years allowing substantial progress to be made giving hope that blockchain technology will fulfill its purpose of being the global technology to change the world.
Examples of the Trilemma
Bitcoin, Litecoin, Dash, ZCash, Monero – Decentralized & Secure, but not Scalable
Ethereum – Decentralized & Secure, but not Scalable until PoS, now it could solve it
Binance Coin, Solana, FTT, Ripple, Stellar – Secure & Scalable, but not Decentralized
Cosmos, Polkadot, Cardano – Decentralized & Scalable, but not Secure
Decentralization is the idea of spreading out power (decision making) between members of an organization, entity, fountain, company, ecosystem, or any other group of people / decision makers… however, in reality, as seen above, perfect decentralization is extremely difficult to achieve, which is why it’s helpful to think about decentralization as a spectrum.
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